Thursday, September 22, 2011

Imagine if the economy were booming: poor economic conditions are creating new opportunities but also slowing the growth of the new digital media platforms

There are good reasons why this website keeps an eye on the markets, and the economy in general. It goes back to when I started out in this business and my experiences through the nineties.

As a young pup fresh out of college, my J degree under my arm, I moved to California from the midwest in order to get my first position in the newspaper business. The move was necessitated by the fact that things were pretty bad in the Midwest back then – the Chicago Daily News had closed down a few years earlier, flooding the market with experienced journalists. Further, few were hiring due to the general "malaise" of the economy. Surely California would be better. It was.

California in the eighties seemed recession proof. While most publishers were not hiring in the early nineties, California was still growing. This continued right through the decade before slowing down following the first Gulf War. Then came the nineties and that little thing I think you've heard of called The Internet. Good times, that's for sure.

The things that really powered the Internet boom was venture capital, fear and enthusiasm. The fear part involved the idea that if one did not move quickly they would be left behind.

Today's digital media environment shares a lot in common with the '90s, but much is different, as well. Today the growth of mobile and tablet platforms is creating incredible opportunities, and in many ways, the slow economy makes this even a better time to invest in the platforms as it allows for a slower, more cautious approach, allows for efforts to at first fail but then begin again, and it keeps much of the more conservative publishers at the sidelines allowing some to get a first mover advantage.

But the economy is also keeping investment money on the sidelines. While a few VCs are still looking for the next Facebook (good luck with that) the true investment professionals know that their job is to find good places to invest now even if that means investing in companies with more modest ambitions.

But why pull the trigger when doing nothing is so rewarding? You see, every day that money sits earning nothing it also sits losing nothing. That is the attitude of many I talk to.

Here is what they see. With one party and much of Europe pushing for austerity, the threat of deflation is seen as more threatening by many than inflation. In an inflationary environment, money has to be put to use or else it loses value over time. In a deflationary environment, your dollar today is worth a bit more tomorrow simply because everything else has lost value.

Think of the real estate market: why buy a home today when you know you'll be able to buy that same home tomorrow for less. This realization causes you to delay (unless you currently do not have a roof over your head).

Cygnus Business Media is one of the few U.S. B2Bs showing any enthusiasm for the new digital platforms.

About eight or nine years ago, after leaving Reed Business Information I contacted a few firms to see if there would be interest in funding a B2B magazine start-up. Today I'm sure every response back would be 'are you kidding?" But back then it took only a week's worth of sending out emails to line up a trip to NYC to talk to investors. The only real problem was that my needs were a few million, they wanted to spend much more, so my business plan had to be expanded.

In the end, I didn't go in that direction (probably too bad) but the doors were open. Today I hear things are not so accommodating for media start-ups (if you have a different story please pass it on). Most of those interested in media are looking to buy, split up the assets and then divest as quickly as possible. M&A activity, always the obsession of some of the media watchers is artificially higher than it really should be simply from the trading of assets between the players.

And that is truly a shame because now is really a great time to invest in media...really.

When I look at the B2B media industry, for instance, I see a complete retrenched industry well behind the others in the move to mobile and tablets. B2B is an industry being run by executives that are not really looking to grow their businesses so much as keep them alive justs long enough to dump as soon as the investment market improves. But what is left of most of these companies after having laid off most of the editorial and sales teams? The answer is their readership and brands, and these still have value.

When I was asked the other day why now would be a good time to launch new products I responded that it is both easier to gain market share in a down economy, and to recover from a first failure. True, the rewards for success are less in a down economy, but they will be that much better when things improve – and everyone else is playing catch up.